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    UK energy problems "won't go away": consultant

Summary

The government should admit that net-zero carbon is too expensive and instead focus on more gas-fired power, storage capacity and demand-side response.

by: William Powell

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UK energy problems "won't go away": consultant

The problems the UK faces as a natural gas importer will not go away and need to be tackled, energy consultant Clive Moffatt told the website Conservative Home September 29.

Predictions made in 2013 about the predicament that an increasingly import-dependent UK would face as it proceeded on its decarbonisation path were shown to be correct in the harsh winter of 2018 and again today, he said.

Moffatt, who founded and chaired the UK Gas Security Group from 2017-19, said: "Consumers, industry and infrastructure investors need to be reassured by government that the need to underpin energy security and affordability will not be ignored in the pursuit of net zero [carbon]."

He said neither the electorate nor parliament had voted for net-zero carbon and the government should explain that "for very good reasons – such as technological constraints, security of supply, industrial competitiveness and affordability" – it may not be possible by 2050.

"There is very little credibility to be gained at COP 26 by the prime minister seeking to lead the world on reducing emissions when his own energy policy is in a shambles," he said, referring to the major UN climate change conference to be held in the UK later this year in Glasgow.

Among Moffatt's recommendations are: the scrapping of the retail price cap as it bankrupts weaker retailers; investing in storage through an obligation on suppliers and shippers or a capacity market auction; and raising short-term liquidity in the gas market through demand-side reduction (DSR) as happens with electricity. This rewards industrial users who bid in to curtail demand at times of system stress.

Use gas to bridge the generation gap

With the demise of coal and retirement of existing nuclear capacity, the UK is very short of both regular baseload and reliable flexible power generation, which makes affordable gas even more necessary.

In the medium term, some 10 GW of new baseload generation capacity is required and this should be provided by gas through a new capacity market auction. Carbon capture and storage (CCS) is still an expensive prototype and so new plants should be CCS-compatible, but not more than that. Only later when CCS is proven should CCS be compulsory, but the operators should also be given capex and opex incentives and preferential dispatch over renewable energy.

Establish an Independent Energy Authority

Moffatt also urged the creation of an independent Strategic Energy Authority (SEA), with an independent chair and expert management board. This would reduce the policy burden on government, remove the need for the Climate Change Committee and allow markets regulator Ofgem to focus exclusively on retail market competition. It would also remove potential conflicts within National Grid as grid investor/owner and system operator.

SEA could, among other functions, set long-term investment targets for generation transmission and distribution based on the need to balance emissions reduction against security and affordability. It could also oversee the system operation of the electricity and gas market and facilitate greater liquidity in the short-term balancing markets through gas storage and DSR. Elsewhere, it could liaise directly with the finance ministry to define and publish long-term budgets for taxes and levies impacting on consumers and industry. And an independent SEA would be able to take a long term view ignoring election cycles and de-politicising the debate.

Moffatt said the key message for prime minister Boris Johnson from now on should be that the pursuit of net zero is not incompatible with the urgent need to deliver secure supplies of affordable energy to consumers and industries. But it might not be achievable in the energy sector by 2050.

The House of Lords committee on regulation and industry is compiling its own study on whether Ofgem is best placed to deliver the net-zero carbon goals or whether a different entity should be tasked with that role. It has been interviewing researchers and others since last spring and the process is expected to last until late November. The committee will then publish a report toward the end of this year.